By Diane Bothfeld, VT Agency of Agriculture, Food & Markets
The Vermont Milk Commission endorses a program to equalize the supply and demand of milk. This will allow milk volumes to stabilize at the national level and milk prices to even out for all dairy farmers. This Growth Management Plan would prescribe a base of milk and require farmers that go over this base to pay a fee to access the market, providing a signal that the added milk is not needed to meet the domestic market, export market and meet a 30 day emergency supply of dairy products for the nation.
Research has been completed by Dr. Mark Stephenson and Dr. Charles Nicholson on three different types of supply management plans and have determined that these plans can work. The researchers looked at three programs, two programs that determined allowable growth and a market access fee and one marginal milk price program.
The Vermont Milk Commission’s growth management plan closely resembles the allowable growth and market access fee programs – a base milk production level is set, milk produced above that level would be charged a fee. A marginal milk price program has a very low price paid for milk marketed above an allowed amount. The level of the lower price is triggered by the milk feed ratio as calculated in the USDA Margin Protection program. The specific difference in the two programs is allowable growth with a market access fee looks at milk production at the farm level and a marginal milk price looks at milk marketed. This is an important distinction because farmers can limit the amount of milk that is marketed (sent on the milk truck) by feeding more calves, dumping milk etc. but the cows are still there. The Allowable growth program looks at milk volume produced at the farm level – marketed or not.
These programs were discussed prior to the Farm Bill in 2014 and an economic analysis was completed at that time as well. The marginal milk price program was a part of the National Milk Producers Federation Foundation for the Future plan. This plan included the Margin Protection Program and the Marginal Milk Pricing program to control supply. The Marginal Milk Price program did not make it through the legislative process to become a part of the 2014 Farm Bill.
The research was an economic model that showed what would have happened if these programs were in place from 2014 through 2020. 2014 through 2018 are known and can be compared to actual and 2019 and 2020 are hypothetical. Overall implementing a supply management program either of market access or marginal milk price did the following:
- Increased Net Farm Operating Income
- Increased average milk price
- Reduced volatility
- Reduced the rate of farm losses
- Reduced government expenditures
- slight (single-digit percentage) reduction in dairy product consumption
The specific findings for the three scenarios are in the table below for the timeframe of 2014 through 2020:
The research shows through economic modeling that milk prices can be improved by growth management of milk volume through a market access fee program. The market access fees paid in are also shared with those farms that did not produce more milk than the allowable growth rate, further improving the income for those farms. The Milk Commission’s growth management plan is most closely matched to the allowable growth and market access plan.
To watch a webinar on this research, go to:
https://dairymarkets.org/supmgt/
Download the full printed on this research at: https://dairymarkets.org/PubPod/Podcast/Misc/SupplyManagement/DMAP%20Working%20Paper%2019-01.pdf
Here is a petition to support growth management - https://bit.ly/2VdTAyN